Sport Chalet sold to Vestis Retail Group

By Brianna Sacks and Stuart Pfeifer Los Angeles Times

Posted:
07/02/2014 04:23:40 PM PDT

Updated:
07/02/2014 04:23:41 PM PDT

Sporting goods retailer Sport Chalet, which was founded in La Cañada Flintridge more than 50 years ago, was sold to an East Coast company that will use the purchase to create one of the nation's largest sporting goods chains.

Connecticut-based Vestis Retail Group will pay about $17 million in cash and assume more than $50 million in debt to acquire Sport Chalet, which operates 51 stores in California, Arizona, Nevada and Utah.

The acquisition ends decades of local ownership of the Sport Chalet chain, which got its start in 1959 when Norbert Olberz and his wife, Irene, bought a small ski and tennis shop in La Cañada Flintridge. They spent the first year sleeping in the back of the shop and showering with a garden hose, but eventually built the business into a chain of successful specialty stores that catered to outdoors enthusiasts.

The company used the slogan "The Experts" and staffed its stores with marathon runners, professional triathletes, experienced divers, snowboarders and hikers, who were often as enthusiastic about their sports as their customers.

Recently, though, Sport Chalet has gone through rough times. The company has not reported an annual profit since 2007, and its stock traded for as little as 68 cents a share last year. It lost $10 million on revenue of $344 million in its 2014 fiscal year, which ended March 30.

With the acquisition, Vestis Retail Group will now own more than 150 sporting good stores in the United States. It already owns Eastern Mountain Sports and Bob's Stores on the East Coast.

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Vestis, which is owned by Philadelphia-based Versa Capital Management, is paying $1.20 a share for Sport Chalet. Based on the total number of outstanding shares listed in a company filing, the sales price would be $17 million. The company had $52.4 million in debt, according to a securities filing. Including debt, the deal would be worth about $70 million.

With the addition of Sport Chalet's stores, Vestis said it will have a national hold in the sporting goods market. All three chains will keep their original names but combine sales lines, the company said.

The deal will help the three brands compete against big-box chains such as Dick's Sporting Goods and Sports Authority, and other giants in the industry, said Marshal Cohen, chief industry analyst for the NPD Group, a market research firm.

"It's a very good deal for both players," Cohen said. "In today's world of sports retailing, bigger really is better."

As part of a larger company, the Vestis stores will have more buying power and increased margins, which are traditionally thin in sporting goods and footwear, Cohen said. He said Eastern Mountain Sports is similar to Sport Chalet, as both retailers focus on serious athletes and staff their stores with sales people who are passionate about the products they sell.

"I would say EMS is a little more modern version of what Sport Chalet is," Cohen said. "To me, on paper, it looks like a beautiful marriage."

Sport Chalet will retain its president and chief executive, Craig L. Levra, who will report to Vestis from Sport Chalet's corporate headquarters in La Cañada Flintridge.

"We are ready for the next step, and we look forward to working with a company like Vestis that understands our customers, our market and our vendors, and has the financial resources to help us grow the business," Levra said.

Levra had been overseeing a cost-cutting mission in recent years, closing underperforming stores, renegotiating leases, even reducing the amount of money the company spent on cash-register tape. He declined to be interviewed for this article. Earlier this year, Levra said, "We're taking all the right steps to get there, to be laser-focused on a better performance for our business."

The Olberz family remained key players in Sport Chalet until the end. The Olberzes' son, Eric, was the company's largest shareholder, with 61 percent of its shares, according to an October filing.

Vestis' headquarters will remain in Meriden, Conn., and the company said it does not expect to close any Sport Chalet stores.